Nvidia (NVDA) shares began trading Monday on a new 10-for-1 split basis, revising Friday's closing share price from $1,208.88 to $120.88. The stock closed up nearly 1% on its first day after the split.
The split means that owners of Nvidia common stock they held at market close Thursday received 10 shares for every share they owned. For example, if a shareholder owned four shares of Nvidia on Thursday, he now owns 40 shares after the split.
Stock splits make stock ownership more affordable by reducing the price of individual shares without diluting the value of existing shareholders' total holdings.
“The stock split will make Nvidia much more accessible to many of these retail traders,” Matt Amberson of Option Research & Technology Services told Yahoo Finance last Thursday. “Now, you rarely see a stock over $1,000 with 50% implied volatility, so option prices are extraordinarily high, so options traders are really looking forward to the split.”
Nvidia's split comes after the company's total market valuation briefly eclipsed $3 trillion on Wednesday, pushing the chip company past Apple to become the second-most valuable publicly traded U.S. company. .
Nvidia stock has soared thanks to the explosion of interest in generative AI that began when OpenAI unveiled its ChatGPT software in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT ) have been scrambling to get their hands on Nvidia hardware to power their own generative AI platforms.
That sent Nvidia's revenue through the roof. In the first quarter, Nvidia reported adjusted earnings per share of $6.12 on revenue of $26 billion, increases of 461% and 262%, respectively, from the same period a year earlier.
Nvidia's data center revenue in the most recent quarter increased 427% year over year to $22.6 billion, representing 86% of the company's total revenue for the quarter. Nvidia's gaming segment, previously its largest business, posted revenue of $2.6 billion.
And Nvidia continues to develop new hardware to keep customers coming back for more. On June 3, CEO Jensen Huang announced that an upgraded version of its Blackwell AI platform, called Blackwell Ultra, will arrive in 2025, as well as an entirely new platform called Rubin scheduled for 2026. And in 2027, the company will launch a version Ultra from Rubin hardware.
Investors view stock splits as a sign of strength, and as a result, companies that split their shares typically outperform the S&P 500 in the year following their announcement.
On average, shares are up 25% in the 12 months after announcing their split, compared with an average return of 12% for the S&P 500 in the same time period, according to Bank of America analysis. This has been true “across market regimes,” Jared Woodard, BofA investment and ETF strategist, wrote in a note to clients.
In particular, the trend includes the period from 2000 to 2009, in the midst of the development of the technology bubble. Nvidia shares have risen about 27% since the company announced its split on May 22.
Nvidia's stock split comes as AMD (AMD) and Intel (INTC) are going after it, announcing their own AI hardware and pitching their future product roadmaps as alternatives to Nvidia's. Nvidia customers are also developing their own AI chips to train and run AI models to help mitigate the cost of purchasing new Nvidia products.
However, it's not just about hyperscalers. Meta (META), Tesla (TSLA), and many other major tech and automotive companies are trying to get their hands on Nvidia chips to train and deploy AI models for everything from recommendation engines to self-driving software.
What's more, Nvidia says it has a growing total addressable market beyond technology companies, including government organizations, research institutions and more, meaning it could have much further to go.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
Josh Schafer is a Yahoo Finance reporter. Follow him on X @_joshschafer.
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